Wrong Message, Wrong Time

Flawed RFS2 report may send inaccurate assumptions to policymakers

By Michael McAdams | October 24, 2011

Over the past year I’ve found myself appreciating more the popular quip by President Reagan when he said the “most terrifying words in the English language” are “I’m from the government, and I’m here to help.” Well, that “help” was offered up to Congress recently when the National Research Council, an arm of the National Academy of Science, delivered a report proclaiming advanced biofuels won’t reach the 16 billion gallon requirement for cellulosic biofuels called for under the renewable fuel standard (RFS2). That’s the kind of help America’s domestic biofuels industry does not need, particularly now as companies are itching to commercialize while Washington is wielding its budget axe.

The report concluded that without significant subsidies or, alternatively, high oil prices or a carbon standard, advanced biofuels made from cellulosic material would be unlikely to fulfill its mandated gallon target under RFS2. After carefully reading through the complete report, I can tell you that boat won’t float.

Of its numerous flaws, the fatal mistake comes with the report’s assumption that the technologies it analyzes have reached their maximum potential and won’t—as we’re actually seeing in the real world—continue to advance at a rapid rate. The report leaves the overall impression that all the various potential pathways are at the same development space in time and doomed to be noncompetitive over the near term. It makes very little, if any, distinction between the various feedstock and technology platforms. Have you heard of Moore’s law?

The report focused on three particular advanced biofuels pathways: gasification, fast pyrolysis and cellulosic ethanol. Personally, since the Advanced Biofuels Association represents a number of cellulosic technologies that have decided making jet fuel, renewable diesel, or gasoline is a smarter bet, I question why the continued focus on simply one molecule: ethanol? As for pyrolysis, I have personally visited two demonstration facilities in the past year and a half, and I can report they are moving ahead quickly and making significant R&D and technological advancement at a rapid rate.

Following the release of the report, Professor Robert Brown of Iowa State University made a significant observation that’s also worth mentioning here. He wrote, “For reasons not clearly justified, data from the ISU studies related to the capital cost of pyrolysis technology, one of the most promising approaches to advanced biofuels was inflated to levels that erased the projected profitability of this technology.”

While the 400-page report was required, it took a great deal of time to assemble; and by the time it was published, I would argue the report has sections that are already behind the development curves they were evaluating. This is a snapshot in time and should not become the gospel to be referred to over the next four or five years, like some opponents of biofuels will attempt to do.

The bottom line is we are now in an environment in Washington where a number of lawmakers on Capitol Hill are either directly trying to remove any form of government support for advanced renewable energy technologies broadly, with some specifically aiming at biofuels. Take, for instance, Rep. Bob Goodlatte of Virginia who recently introduced legislation to repeal RFS2. Still there are others, many of whom are not fully aware of the promise and success of our industry, pulling back as the Solyndra solar company debacle has given anxious lawmakers reason to go dark for a while on all topics related to government support of advanced biofuels.

One redeeming aspect of the report is the recognition of the need for a stable policy platform at the federal level if we are truly to deploy these advanced biofuels technologies. It simply sends an extremely confusing message to those considering investing in the sector to have the supporting tax provision expiring on a year-to-year basis. Additionally, it is confusing to have multiple loan guarantee programs that expire or have different terms of engagement between the parties, or are run by multiple agencies. Clearly, with the current commercial lending environment a strong consistent federal policy over a reasonable period of time would be more supportive than the existing array of various support mechanisms found in the federal policy books.

Understandably, the world isn’t waiting for America to get its house in order. This is all occurring while other nations around the world, specifically China, are doubling down on their bets in the advanced renewable energy space by investing a significant portion of the GDP to lead the race in developing advanced biofuels and other clean energy technologies. Developing and deploying innovative and paradigm-shifting technology such as advanced biofuels takes vision, time and investment. It is far too early in the game to denounce the pace or efforts in this space. It offers too great an opportunity for creating economic and energy security while moving in a more sustainable direction. Washington, next time you seek to promote advanced biofuels, lend a hand that pulls us forward—not one that pushes our heads down.